Goldman Sachs Doubles Down & Trump Wins Big In Iowa

Hello and welcome to this latest podcast episode. I'm joined by Piers Curran, our co-founder, and we are going to discuss, well, really 4 things. We're going to look at some economic data points. We've had surprises for both UK CPI and US retail sales, and also a little update on Chinese stocks and how their economy is faring to kick off the year. We're 19 days in so far. We've also had more of the big bank earnings. This time it was the rivals Goldman Sachs versus Morgan Stanley. So we'll look at some of those results and ask the question, is Goldman's slowly, are they tricking this market into believing about their diversification and durable incomes and the rise of the asset management division, which has always been in recent years, the kind of crown of Morgan Stanley and what's given them a competitive advantage, but is that gap narrowing? So we can have a look at that. And then of course, Donald Trump, a landslide victory he's just had. And so is he on course now for a straight Biden-Trump, uh, shoot-off when we get to the end of the year? So we can discuss that, but I also want to talk a little bit about AI in respect to politics. And because of course, as we all know, I think, correct me if I'm wrong, Piers, isn't the percentage something like 75% of the world's democracies are going to the polls this year, and it's like over 4 billion people or something insane like that.

Yeah, big, big year. Well, a lot of that— I mean, India is going to the polls, so there's your— yeah, there's your 1.4 billion of that number right there.

But well, yeah, and so it's a really important year for AI and, and, and some of the consequence of that. So I'll look to just go over a couple points on that front, but perhaps let's kick things off with the data perspective, starting here in the UK where inflation had unexpectedly picked up. That was the main kind of headline that they were saying. These were December readings. It was led by alcohol and tobacco. The number on the year-on-year reading was UK inflation rose to 4%. Analysts were expecting it at 3.8, and it marks the first month in which the annual CPI had risen since February of 2023. So anything in those numbers, Piers, that shocked you? More importantly, Does this change your mind at all about how the market is priced in their expectation about the interest rate cuts to come from the BoE?

No.

Okay, we'll move on.

So I think there's two important things here. So that last thing you said, it's the first increase in the year-on-year figure for, what did you say, for 12 months since Feb?

Yeah, 23.

But the increase is 0.1%. So, um, we had a headline at 4%, inflation at 4% for the month of December. Um, November was 3.9%. So if you looked at a chart, we're still at the bottom of what has been a pretty straight line downward trend over the last 12 months. Remember that we peaked at 10.4% back in that month of February, right? So 10.4% down to 4%. 3.94, same thing, right? So I guess we're just, we're kind of down at the bottom. Well, I'm not saying the bottom. I mean, I guess the point is you can't say that the downward trend has reversed from this piece of information. That's what I would say. The other thing is it was basically booze and fags that did the business. And there's a specific reason why. And that's because the UK government sharply increased the tax on tobacco and alcohol.

I thought you were going to say it was because of Dry January and Piers Curran was out of action, but no, these were December figures.

These are December figures. Yeah. So you're always going to get a spike in alcohol consumption, but yeah, it's because of a tax hike from the Treasury, which really has kind of led to this. So, net-net, this is not really changing anybody's mind. And maybe some evidence to, which is really contrary to what we're going to talk about when we cover the US in a second, but news out this morning from the UK about the month of December is that UK retail sales fell the most in nearly 3 years. So I think that there tells you generally the direction economically. So yeah, I'd still think Bank of England are eyeing up some cuts in the near term. Okay.

All right. So then, well, just to be clear then for anyone who's, I guess, relatively new to these subjects, it's not like, just to make the point, it's not like a piece of data comes out and then interest rate expectations go from cutting to hiking. It's much more gradual than that. So it can go from the number of hikes or number of cuts, excuse me, decreasing if it was more a higher inflation number or more hawkish, as we say, or the timing of the first rate cut can move.

Yeah.

So just to kind of stress that point, if you're not used to some of that.

And even more nuanced, what's the probability of a rate cut like Well, what is it at the moment for the Bank of England? I haven't been tracking them as closely as the Fed, but is it March, a March cut like people are perhaps still thinking the Fed might do?

I think it's got up to that as much as that, but I think it's been pushed back a little bit.

There's basically probabilities at each meeting of whether rates are going to change up or down and ultimately, like, March cut by the Fed has been a very kind of, you know, well-documented sort of expectation. And the reason why it's March is because that's the first month looking at over those probability curves, that's the first month where the chances of a cut is higher than 50%. So then that becomes the month that everyone starts to talk about, right?

And when you talk about the curve, so if you're a rates trader, you can basically trade what we call the short end of the curve, which would be then looking at, I mean, you can trade short-term interest rate futures or STIRs, right?

Yeah.

Which would be, you can change the fluctuation of expectations of where people think UK interest rates will be in 3 months, 6 months, 9 months, 12 months. If you think about it, when a piece of new information comes in, then that curve kind of alters a little bit in its shape, and that movement is what people trade. Okay, so hope that makes a bit more sense of the jargon. But yeah, let's move on then and let's go away from booze and fags for a second and talk a little bit about US retail sales, which rose at their strongest pace in 3 months into December. So pretty resilient consumer then in the States.

Yeah, so it's almost like the exact opposite, isn't it, than the UK? The UK's figure lowest in 3 years, whereas then the US one has beaten expectations. And seems to be really strong. And actually, that's been the theme of it over the last, well, few days, really strong data out of the US. It's not just that retail sales figure, the jobless claims, which is one of the measurements on the labor market side, was the lowest since October. Now that's a weekly figure. So that's reported every week. It's just reporting how many people claimed jobless benefit for the first time. So for that data, the lower the better. So it was the lowest since October. That's a good thing. Um, and this all fed into something called the Atlanta Fed GDP Tracker, um, which is— well, I think all these— so the Federal Reserve, you'll of course have heard of, it's actually split— the US is split into 12, 12 or 8 federal districts. 12.

12.

12 federal districts, each of each district having its own kind of central bank, if you like. And the Atlanta Fed is one of the— so Atlanta's one of the districts. All of these districts are tracking GDP. They're tracking economic activity in their models to try and then help them make decisions on policy. But the Atlanta Fed, when was it? A few years back, they came out with— they've got a GDP tracker and they came out with this forecast. That was quite a long way away from consensus at the time. And then it turned out that they were right. And ever since then, basically no one looks at anything else other than the Atlanta Fed GDP tracker. And it's almost become, because of that one amazing result they had, it's kind of become the default sort of tracker for what's happening. So anyway, they're— yeah, go on.

Yeah. So one added thing that probably wouldn't appreciate if you're not trading or analyzing this stuff is the fact that when you think about GDP as a dataset, so it's, it's looking back in retrospect and normally in the official GDP figures, you'll see 3 releases over a quarter, but then you have to wait obviously several weeks in between each one. But what the Atlanta Fed GDPNow model does is it, the model updates with every significant, and obviously there's a slight proportion weighting to whatever the data point is. Into the model, but the model updates almost real time. Yeah. So it gives us as markets people visibility about the movement of these expectations of the economy, which allows us to guess then where we should be positioned accordingly for where we think rates will be in the future.

Yeah. And the Atlanta Fed think that in Q4, the US economy grew at 2.4%. So that, that, that has gone up in, in, in the last sort of week or so, their forecast as new data has been fed into the model. The models improving their forecast. Now, remember that back in Q3, the US had a stonking quarter, grew at over 5%. We're expecting a big drop from that, but this is now looking like it's going to be a smaller drop than we thought. If you just think about 2.4% as a growth rate, that's super solid. That's a really decent, strong number. Yeah, it's looking again like the US economy is remaining resilient for longer. Just digging into the retail sales figures specifically there, the auto sales were up 1.2%, which tends to have an oversized influence on that data because auto sales, a car, obviously, it's a very high-ticket item. So often we take that out. And so we'd also look at retail sales ex-autos, and even there it was strong. And retail like clothing, up 1.5%, general merchandise stores up 1.3%. So yeah, it's kind of building materials, guarding equipment, that kind of stuff actually played through very strongly. Gasoline was down 1.3%. So it's interesting that the retail sales figures have come through strong despite the fact that gasoline was down because prices have dropped. And overall, looking on their year-on-year figure, That's the strongest growth rate for 12 months. So it's quite interesting. UK, worst figure for 3 years, and then US, strongest figure for 12 months. It's again, they seem to have— these economies seem to be remarkably decoupled compared to, I would say, historically. So yeah, strong news from the Fed. What I'm interested in is, you know, how has this played out in markets? Because It's, you know, we've been banging on about, you know, because, okay, so strong data means the economy is performing better than we thought though. So how does this play into our interest rate expectations? So we're now thinking, well, the Fed, maybe they're not going to cut in March. Maybe they're going to delay it because the economy is too strong, right? And so how does that play out in the stock market space? Well, we talk about interest rate sensitive stocks and on those stocks that are not interest rate sensitive. And we've talked about it a lot before, interest rate sensitive stocks, typically they're your smaller guys. So there's an index called the Russell 2000, which is a US stock index tracking smaller mid-cap companies. And they're typically more sensitive to higher interest rates because they, they're more levered, they got more debt. So the Russell 2000 index is down 7%. This year, um, because all that excitement about 6 rate cuts in 2024 from the Fed, that's really dampened down here. Well, I don't think we're thinking 6 anymore given how strong the economy looks. So the Russell 2000 has dropped 7%. You compare that to the NASDAQ, which is pumped full of your Mag 7, um, that's up 3.7% and made new highs for the year. into the close yesterday. So that's quite a stark, um, sort of opposite directions there because of whether these stocks are interest rate sensitive or not.

Yeah, and just looking at that NASDAQ chart, we obviously had that really big ramp on the kind of Fed pivot, if you like. Yeah, came in the end of last year. Um, we then kind of peaked, just peaked, just kind of going into the Christmas period. And then what I loved is at the beginning of this year we sold off and everyone was kind of questioning, getting a little bit bearish again. Start getting the familiar voices banging the drum on, on the sell side institutions. Uh, we did fall about 5%, I think, in the NASDAQ to start the year.

Yeah.

And like you said, we've recovered that and now some, and also broken that end of year high.

Yeah.

So just makes me kind of question, uh, like that first 10 years or so of my career serving people like you sort of trading the intraday market. I'm like, why, why did we break our backs in the intraday market? I just remember one thing that, um, buy and hold— a portfolio manager, um, who we both know, uh, in the Middle East, and what he said famously to me one time, he was just like, and there's a, there's a very, there's a dirty secret amongst all of us here in the asset management world. And I was like, yeah, I come, what's that? What's that? And he said, if you buy things over time, they tend to go up. And I was just like, why am I killing myself getting up at half 4 every morning to try and like catch these little breakout moves? But yeah, it's so interesting, isn't it? It's like, look, you know, it's a, we're only a little bit way into the year, but yeah, so quick with the reversal and the narrative changing in the media, of course, in Czech.

Yeah.

All right. Well, look, you've talked about this decoupling. So you've got UK, maybe not so strong. US, absolutely resilient. So where's China in this then? Just to cover the global regions. Yeah.

China, bad news, I'm afraid. China's really struggling. And it's kind of, I mean, that, that can be represented in their stock market performance on the one hand. If you look at 2023. Then their market was down. Their headline, well, the Hang Seng, this is actually okay. So this is the Hang Seng China Enterprises Index. So this is basically Chinese listings in Hong Kong, right? So that index was down 14% last year. If you think about the S&P 500, that was up, what was it, 20-odd percent. Okay, in 2023, um, the Hang Seng down 14%, and then into this year, well, the S&P's up again, right? New highs. NASDAQ, new highs. The Hang Seng is down another 11%. So 14%, massively underperforming last year, continuing to underperform this year. Um, a couple of things that have happened just this week. Um, so their, their Premier Li Qiang Um, has been in Davos. Um, so I'm sure listeners, you might have been reading about this, this kind of, um, well, what you want to call it, Davos these days. Is anybody interested in, in what goes on in Davos anymore?

It's just, um, you know, all I know is that that inflation, uh, Davos is what, Switzerland, is it? So inflation is going to go up, as is fags.

Basically, just rich people meet in a super posh ski resort on an annual basis to pretend to talk about important stuff. Well, how to run the world.

AI is the topic of Davos this year. Yeah.

Unsurprisingly. Anyway, lots of people doing lots of speeches. So anyway, the Chinese Premier was there, Li Qiang, and basically people were looking to him for just some reassurance, some evidence that the Chinese government was going to be getting the bat out a bit with some more stimulus, right? They announced their GDP. He announced the GDP figure for 2023 a day early, which was a little bit of a surprise. And it came in, I think it was 5.2% was their growth in 2023, which of course is the slowest growth for for decades. All right, that's the headline. And they've got a big housing crisis and a real estate crisis. And we were looking for just some reassurance from him to say, look, we've got this, we've got some measures that are coming down the pipe. But he said none of that. There was no indication at all that the Chinese government are gearing up for any stimulus. So again, cue another wave lower in the stock market, which is actually being led by foreign investors pulling money out. It's quite an incredible stat. The stock market was down, as I said, 14% last year. At the start of 2023, foreign investors owned about $33 billion worth of Chinese stocks. By the end of 2023, they'd sold out 90% of that, and they're continuing outflows this year. And then the second point, the other, or whatever number point I'm onto here, there was some demographics data where the Chinese population shrunk again last year. So that's the second year in a row that the population has shrunk. So demographically, that's incredibly bad news. And what I was reading, a really interesting article, because it's Chinese New Year coming up. Uh, start of Feb. So we'll enter into a new year. Do you know what, do you know what animal it is this, this coming year?

Oh, it's a good question. I'm going to pick randomly. Tiger.

It's the Year of the Dragon, baby.

Oh, it's my dad's. My dad's a dragon.

This is the year.

Okay. So if my, if my dad's a dragon, guess what I am? Because I'm, for anyone who's just listening, I'm half Chinese. So I do have a, I actually have a chain with my animal on it.

Oh, do you?

Which animal is it?

Oh, I haven't seen that. All right. Monkey.

No, you get one more guess.

Mouse.

Pig. Pig, which actually is a good one.

Okay.

Healthy, prosperous.

Intelligent. Intelligent. But the dragon is the one. Yeah, right now, to the point where if you track birth rates, if you track demographics, and this is across, across Southeast Asia as well, then there's always— oh well, historically there's always been a spike in the birth rate in the Year of the Dragon because couples are trying to time it so that their baby can be born in that year and they're, and they're a dragon. Right. So we shall see. I mean, obviously Beijing are desperately hoping that there's going to be another kind of dragon. They're called dragon babies, right? There's going to be another dragon spike. But there's some analysts who are saying it's so basically couples and women don't want to have children because of really two things. A, it's super expensive on the education side because it's so fiercely competitive and there's tutoring going off. All over the place, and it's all about getting into the right university because that really then secures what job you're able to get. So people are reluctant because of the cost. The other thing is it still seems that being a female and taking time off to have a baby has an outsized negative impact on your career prospects in China relative to, let's say, some Western societies where that's improved. So Anyway, they've got a real problem demographically.

Yeah, I watched a documentary about this actually, because China had stopped reporting in the last recent period their youth unemployment figures.

Right. Yeah.

Which is commonly what people do when the data's going in the wrong direction. They don't want to publicly declare it. And what they were saying was that the pandemic has really changed things for young Chinese people because of the nature of the lockdown. And what's happening is that their willing to— basically, a lot of them are overqualified is one thing. So they might be university educated, and the jobs then that the government's trying to do is filter them out into the non-metropolitan areas, but they don't want to do those more manual labor jobs. So they're willing to just become unemployed.

Yeah.

So yeah, it's a byproduct of that. I don't know.

And in some regions, the youth unemployment is, is thought to be over 50%.

Yeah, crazy.

I mean, it's, it's, it's bad. And sorry, overnight, last point, I've talked about stocks going down here. The biggest Chinese brokerage firm last night banned short selling, which is always a very clear sign that the government is now going, hang on a minute, we got to try and intervene here because this is starting to look really bad.

Yeah. So yeah, two, the last two points on, on my side. One is that you're, you know, you're right. There's a, there's a generational problem with moving demographics. It happens incredibly slowly. So therein then does lie what I think is only a pathway for more geopolitical unrest between China and the West because of what they will now need to do to double down on productivity and other forms of reaching that, which aside from policy responses is AI.

Yeah.

Yeah. And utilizing that is not going to be aligned with probably the inbound approach through regulation and the rest of it that Europe, Europe, Europe, the US will, will probably take. And that's going to draw further conflict between the two. And all this happening with the alignment, obviously, already that you have with the Russians and the Indians, uh, and, and so forth, that forming this extension of the, the BRICS club. So yes, definitely fascinating in the period ahead for sure. But look, we can talk about that stuff for hours, but let's, let's, uh, let's move on and quickly touch on the banks because yeah, Yeah, we had MS and GS. So after our banking special with Stephen last week, what do we have from these two?

Well, I guess mixed, mixed. Well, Morgan Stanley, not good really. I mean, their numbers, I guess the headline was that their profit figure was down 32% in the fourth quarter compared to the fourth quarter of last year for a few different reasons. But one they're citing is rising costs. And that's kind of come from a couple of sort of, well, 3 kind of main things, I would say. One has been severance. I mean, they've been slimlining like a lot of the banks. They've shed 2,400 employees into the end of last year. So that cost them $350 million. That's taken their workforce down to just over 80,000 in total. Other costs, interesting, which kind of ties it. So the, the difference between these two banks, if you go back 5, 5 years, maybe a bit more, they took opposite sort of pivots. Historically, these two banks, they've always been compared— Morgan Stanley, Goldman's— they've always been the arch rivals. And that's because historically they're all about investment banking and, and global markets. All right, they're the kind of old kind of broker-dealers. So they rely on investment bank fees and then they rely on their trade flow and their fees from facilitating trades. Okay. The thing about these, both of these two revenue streams, they're quite volatile, they're quite cyclical. And certainly we've seen that on the banking side where we've had a really big downturn in banking fees over the last couple of years as deal flow has really dried up. Right. So, but if you go back more, go back 5 years or so, both banks said, well, look, how do we diversify? Um, what else can we add on here? And actually, can we come up with revenue streams that are more stable? Morgan Stanley decided to kind of really double down and go for it on the wealth management side, whereas Goldman's decided, right, let's go after the retail banking space. Okay, David Solomon, the head of Goldman's, famously disastrously trying to pivot towards retail, and they've wound that all back in and done a massive about-face. Okay, big disaster, cost them a huge amount of money. So they've been underperforming Morgan Stanley for the last few years because of their choice of pivot and how they badly executed it. In contrast, Morgan Stanley's pivot to more to wealth management has been really positive, very strong. It's been incredibly successful. Third leg to their stool, stable sort of revenue growth. But they made a couple of big acquisitions on that side in recent times. And there's so costs going up here. Costs in their wealth management unit are up 10%. Part of that is part of this integrating recent acquisitions. There was also a one-off payment where they settled with the regulators. They had to pay $249 million. This was a long-running probe into a kind of block trading shenanigans going on. So anyway, a big bill to pay there. If you add all of these up, then ultimately their, their net income for the quarter was $1.5 billion. Okay, that's compared to $2.2 billion in the same quarter last year, so down 32%. What's the Goldman's figure? They clocked in with a net income of $2 billion. So that's better than the MS 1.5. And for Goldman's, that means their profit's up 51%. So they've really kind of gone in big-time opposite directions here. And really, Goldman's are now basically saying, all right, Morgan Stanley, you made the right choice. We've changed course. We're now following suit because they're now really quite aggressively going after a pivot towards wealth management. As well.

Yeah, no, it's interesting because I guess they're coming from a low base in terms of investor confidence at this point. So they've got some decent upside, whereas for MS, the upside is probably more, more limited, I would probably say. So yeah, I mean, one of the things here as well that's probably a decent kind of wind behind Goldman Sachs going forward is the fact that, um, you said about the volatility of the M&A environment. But just this week we had another, we had one of the largest deals announced worldwide in the past 12 months. Didn't involve Goldman, actually it was Evercore who are actually storming it up the M&A deal chart. But there was a chip designer Synopsys, they're buying a software developer for $34 billion.

Yeah.

But one of the things here is that the early signs which were coming at the end of last year are that M&A activity is going to be way better. And even though I think the percentage was something like M&A activity for Goldman's was down like 40% or something last year, they're still the top in terms of actual dollar value.

Yeah.

If they start getting that motoring with asset management, then yeah, it could be interesting to see on that gap.

Yeah, and they're bigger and better at banking than Morgan Stanley. So you're right, if we are at the beginnings of the start of an upcycle on M&A flow, Goldman's will benefit from that. And people are looking at these two, as I said, they're always the two that have been compared. And it used to be, go back to like 2019 and Goldman's was a bigger company from a market cap point of view. Before then, they went on their pivots, as I said, and Goldman's got it wrong. So since really 2020, Morgan Stanley have been a more valuable business than Goldman's. And what's happened just into the end of last year, that gap is diverging, sorry, converging. And so it's getting smaller. And so right now, that was one of the big headlines people might have seen in the FT where they're talking about the valuations of these two. So currently Morgan Stanley Their market cap at the close on Wednesday was $138.5 billion. Okay. The entire worth of their company, and that's down from $192 billion, which was their peak in 2022. So it's been a bad sort of 18 months for them. And Goldman's valuation is kind of narrowing on that. Goldman's is kind of going up. So yeah. I mean, Morgan Stanley have still got it, but I guess people are speculating that this might be the year where Goldman's retake the lead, especially if that banking kind of revival plays out.

Yeah, I was just looking at the GS earnings presentation. I'm looking at page 8 and they lead with the headline, over 70% of 2023 revenues are driven from consistent baseline and more durable sources. The word durable revenue appears 10 times in the first 9 pages. And it's interesting. I know it's kind of summarizing the end of the year in this latest quarter, but there's 9 pages of strategy update before they actually talk about their results.

Yep.

Kind of Citi-esque in terms of full board restructure. And they're just looking to, yeah, I mean, in their words, bang the drum on the power of diversification and consistent ability to capture upside. So if that's the marketing men at work to juice the investor appetite, then hopefully we've done our part today. So yeah, let's move on then and let's talk a little bit about Trump. Before I begin, because I remember, I remember a very angry American trader once calling me on the desk. And I think when we were talking, we were talking about caucuses and I was saying a caucus and my God, did he give me the hairdryer, this trader. So I think I've got it the right way round. You can correct me if I'm wrong, but the caucus of Iowa is what we had. or the caucuses. So Donald Trump basically had a landslide victory on Monday. And what I wanted to do is go, what happened? What is it? And what happens next? And then a few other thoughts as well. So feel free to chime in whenever you see fit. But essentially, this gives the former president his first victory in the contest for the Republican presidential nomination. So Trump's victory— just give us some stats first. It was the largest ever vote share in a contested Iowa caucus. Uh, in fact, Trump's victory in Iowa was, was pretty, pretty massive. He won most votes in all but one of Iowa's 99 counties. So just when all you read in the press is kind of negative Trump, and he's— I don't know, he's trying to What was the last thing he got? He was threatened to be thrown out in some hearing because he kept butting in.

Yeah.

Yeah. Every 5 seconds. Um, but he's, it's kind of like he's more popular than ever. And looking at the actual stats here, um, it was 51% that he captured. Second place, Ron DeSantis, 21%. Yeah. I mean, that gap is large. Um, as you would imagine. He's dominating amongst the, the less educated, the working-class voters. However, actually, his breadth of his base just seems to have shifted slightly and got more diverse, if anything. Um, so younger, richer. Um, one thing that I guess does stand out and it's worth noting was that the turnout is really low though compared to prior prior years. In fact, statewide voter turnout almost halved.

Yeah, that's crazy.

28.7% in 2016 to under 15%. One thing that some analysts were commenting on was the weather. I mean, you think it's cold if you're in England right now at -2°C. Get yourself over to Iowa on Monday night and yeah, you, you'll feel what real cold feels like. But so a couple of different things. One thing is someone you've mentioned before is Vivek Yeah, uh, Vivek Ramaswamy, uh, biotech entrepreneur. Yeah, yeah, he, he dropped his bid and he was— you were saying, oh, he could be a dark horse here. Yeah, um, because he's kind of come onto the scene, captured a lot of media attention, um, but he dropped his bid for the nomination after winning less than 8% of the vote. And what's key in these types of things is, well, who does his voting base then— who does he back? And they naturally shift into that, um, that candidate. And he was endorsing Trump, essentially.

Yeah, yeah.

Um, so a couple things. What is a caucus? Because I think if you're in the UK and if you're a student, you probably think— probably never really have engaged in that kind of election cycle before, or at least read stories about it. So In short, a political party gather and they're trying to select their delegate, uh, to go on, uh, in these state party conventions to go into the presidential race. Um, the delegates support particular candidate for political office and all these candidates will put forward their policy ideas, uh, and so forth. Um, the most famous caucuses are held in Iowa historically during presidential years. Uh, and, and as I said, Trump has absolutely stormed it here, and I think we've got more to come. There's two other big ones, I think, in the coming week. Uh, New Hampshire, uh, is another one. So yeah, it's looking pretty conclusive at this point, at least. Um, he's, he's the overwhelming favorite, uh, in this first endorsement of, of the Republican voters. So yeah, Anything there before I kind of COVID a few other points that I think, or is this all as you would have thought?

This is going to be an absolute landslide for Trump on the Republican nomination. They might as well stop bothering with these caucuses. So DeSantis and Nikki Haley are now basically the, the only two left in the running against him, and they're so far behind. Literally, you might as well just stop, give Trump the Republican nomination. So it'll be Trump versus Biden. Some people had been hoping that it wouldn't be Biden and you'd get an incredibly unusual event where a sitting president would decide not to run again. Obviously, he's very, very old. So some were hoping that the Democrats would force Biden to step aside. And there's a guy called Gavin Newsom that was thought could be the alternative, the younger alternative, right? But it looks like that's not going to happen. So it looks like it's going to be Biden. So Trump, Biden, I'm sorry, but Trump's going to be president. That's it. Seriously, I think it's just an absolute foregone conclusion in my view.

Yeah, I do think the current uptick in the geopolitical situation of 2023 lends the the foundation for Trump to be, to just kind of go back to form, I guess, of, of what he has done before and talk about America's positioning in the global order and how they need to be more aggressive in protecting that and so on and so forth. So, yeah. But yeah, one, one of the things I wanted to close on was I mentioned at the top of the episode about how AI will likely transform Yeah. The elections this year, and this goes for elections across the board, but notably the US, because what happens in the US will reverberate and have consequence in many different dimensions across the world. So a couple of different things here. We've got 4 sections. One was instant responses. And what this is talking about is this idea that politicians now have access to very powerful generative AI tools. That weren't there in previous campaign developments. So what could happen is response times could be like in minutes in terms of something happening, and you could have an AI who's trawling the net. The AI can think about a strategy, a strategic response, and it could come up with a hard-hitting, um, kind of comeback to something that's been said. And not only that, it can go on. It could create speeches, pictures, jokes, memes, AI generative video content, all of these different things. So it's gonna get pretty wild, I think, as we get closer to it. But I'll come on to disinformation in a minute. That's definitely another one. So instant responses is one. So it's almost like just giving these strategy, these strategist teams of these political campaigns just, and, and it's like being in a medieval war and someone comes in and says, here's a load of tanks and machine guns now. It's just, it's just taking it to a whole new level, um, in terms of the, the process. Then precise message targeting. This is probably one where it's happened before, but it's just getting more powerful in the fact that enabling precise audience targeting, which is obviously super critical in politics because in politics it's not about appealing to the masses, it's about appealing to the fringe small swing voter. And if you can get them over the line, that's what wins you a political election. But you can get even more granular now and even more influence them in different ways. Um, then there's the democratization of disinformation. So again, bringing sophisticated tools now, not to the political party strategists, but to people like you and me. So if I have a strong political view, for example, not that I would go out voicing it, but the idea being here is that we could all now have access to these tools and promote our preferred candidate and our preferences. Our political views can be amplified far greater. In a far more sophisticated way than ever before. So yeah, people no longer will need to be a coding expert or a videographer. You could basically generate text, image, videos, programs straight away, and obviously leading to disinformation. And the interesting thing I was listening to a podcast about with that is if you think about a scenario where 2 or 3 days ahead of the actual election, let's say in the US, and there's a video that comes out of Biden looking all lost or stumbling, something which could be, um, acceptable in terms of belief. It's not too outrageous. Yeah. But something happens and the idea being then is that by the time that the election has happened, and then it's come out that that was fake news and it's as good as done at that point. And so this is how precarious this can be. And I would fully expect that to be probably the tactics that will be deployed more aggressively than ever. So the ability to be able to cut through the noise is going to be incredibly difficult, certainly on social media. And then The final point is kind of guardrails and disclosure requirements. You know, what makes it quite worrisome is that there just really isn't any regulation in AI. As I've read more into it, it's, it's just nonexistent.

Yeah.

And the problem is, is that there's a real lack of incentivization for the most talented people in this area to go and work in regulation. 'cause you wanna work where there's funding. So there needs to be some alignment there with governments to incentivize young people to want to go into that space. But then there's also this idea of a bottleneck and the technology's moving so rapidly, but you need these PhD-level caliber people, these people from industry, and yet you can't generate them quickly. And so by the time that you can, even if with the best of will of government, they cannot get to the point of hiring enough for regulation to keep up with the disinformation and the false narratives and all the rest of it. So solution, you know, that I've been reading is all about these other ideas about containment and how do you go around trying to police this type of thing. But yeah, I think for the point of me explaining this was how the elections this year, particularly in America, It's going to be a real litmus test, I think, for where we are at on a societal level with AI and the response then that will come therewith from a regulatory point of view and the appetite then. 'Cause if you, if you thought the last one was pretty, pretty spicy, this one's gonna be even, even more so.

Especially with Trump in town, he's not gonna be shy about exploiting these tools. And it kind of, you could say in a way it just, Yeah, we're in that void where AI has suddenly leapt forward and yeah, there's that regulation void. And so you could argue it's just going to undermine— is it going to undermine democracy in 2024? It'll be interesting to see if there are any major, major, major events where an election is won you know, off the back of fake news.

I guess what would be interesting to monitor on that point would be, I would get a calendar then, if all of these different elections, because like what we had, had with Cambridge Analytica, they would test out the techniques and the software and the strategy in smaller, uh, lower-level political events. To refine the process to then deploy it. And lo and behold, the US is one of the last ones of the calendar year. So that's gonna be plenty of time to train your model to optimize into that event.

Trump's still gonna win.

Well, that's it for the show. So yeah, happy Friday if you listen to this on the day of release. Have a great weekend. Uh, don't forget to follow and subscribe to the channel and put on the bell icon to get notified whenever the latest episodes drop. There's another one coming out on the banking front, um, with myself and Steven next week. But until then, uh, take care.

Thanks, Ant. See you later.